Canadian Dollar declines ahead of US JOLTS Job Openings data

The USD/CAD pair gains ground to near 1.4050 during the early European session on Tuesday. Traders continue to weigh the developments surrounding US-Iran talks. The US JOLTS Job Openings data is due later on Tuesday. On Friday, the US and Canadian July employment reports will be the highlights.

Bloomberg reported on Monday that US President Donald Trump claimed talks with Iran are ongoing, saying this is Tehran’s “last chance to sign a good document”. Trump added that he expected negotiations to begin in the next day or two to reopen the Strait of Hormuz and create a pathway for Iran to address the US’s concerns about its nuclear programme. 

Nonetheless, Tehran denied that talks with the US were taking place.  Iran’s Foreign Ministry spokesperson, Esmaeil Baghaei, stated that the country’s current focus was on negotiations with Oman over the Strait of Hormuz. 

Any signs of renewed tensions between the US and Iran could boost crude oil prices and support the commodity-linked Canadian Dollar (CAD) against the US Dollar (USD). It is worth noting that Canada is a major oil-exporting country, and high crude oil prices generally have a positive impact on the Loonie.

The US July employment data on Friday will be closely watched as it might offer more clarity on the Federal Reserve’s (Fed) next policy move. A stronger-than-expected outcome would reinforce higher-for-longer US rate bets and underpin the Greenback. Markets have priced in nearly a 64.7% odds of a rate hike in September, down from about 77% before the July Fed meeting, according to the CME FedWatch tool.

Canadian Dollar gains capped as USD/CAD stalls near 1.40

Analysts at Scotiabank note that the Canadian Dollar has drawn support from a "generally softer USD undertone" that has developed over the past couple of sessions. However, they highlight that the CAD is "having some trouble progressing through the 1.40 area" in USD/CAD, underscoring that recent gains remain constrained despite the more favorable US Dollar backdrop.

Technical Analysis: USD/CAD keeps a bullish vibe in the near term

In the daily chart, USD/CAD holds above the 100-day simple moving average (SMA), keeping the broader uptrend supported despite a moderation in momentum. Price sits just under the Bollinger Bands’ 20-period SMA, while the Relative Strength Index (14) at 45.9 has eased back toward neutral territory, suggesting the recent overbought phase has dissipated without triggering a deeper correction so far.

On the topside, initial resistance appears at the Bollinger middle band near 1.4085, with a stronger cap at the Bollinger upper band around 1.4182. On the downside, immediate support is aligned with the lower Bollinger band at 1.3985, ahead of the more strategic floor at the 100-day SMA around 1.3907, where buyers would be expected to defend the prevailing bullish structure.